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Trust and Loan Companies Act (S.C. 1991, c. 45)

Act current to 2022-09-22 and last amended on 2022-06-23. Previous Versions

PART IXInvestments (continued)

General Constraints on Investments (continued)

Marginal note:Regulations

 The Governor in Council may make regulations

  • (a) respecting the determination of the amount or value of loans, investments and interests for the purposes of this Part;

  • (b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by a company and its prescribed subsidiaries to or in a person and any persons connected with that person;

  • (c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b); and

  • (d) concerning specialized financing for the purposes of subsection 451(4).

  • 1991, c. 45, s. 452
  • 2001, c. 9, s. 550

Subsidiaries and Equity Investments

Marginal note:Permitted investments

  •  (1) Subject to subsections (4) to (6) and Part XI, a company may acquire control of, or acquire or increase a substantial investment in

    • (a) a company;

    • (b) a bank;

    • (c) a bank holding company;

    • (d) an association to which the Cooperative Credit Associations Act applies;

    • (e) an insurance company or a fraternal benefit society incorporated or formed under the Insurance Companies Act;

    • (f) an insurance holding company;

    • (g) a trust, loan or insurance corporation incorporated or formed by or under an Act of the legislature of a province;

    • (h) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province;

    • (i) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities; or

    • (j) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of banking, the business of a cooperative credit society, the business of insurance, the business of providing fiduciary services or the business of dealing in securities.

  • Marginal note:Permitted investments

    (2) Subject to subsections (3) to (6) and Part XI, a company may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (j), whose business is limited to one or more of the following:

    • (a) engaging in any financial service activity or in any other activity that a company is permitted to engage in under any of paragraphs 409(2)(b) to (d) or section 410 or 411;

    • (b) acquiring or holding shares of, or ownership interests in, entities in which a company is permitted under this Part to hold or acquire;

    • (c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the company or any member of the company’s group:

      • (i) the company,

      • (ii) any member of the company’s group,

      • (iii) any entity that is primarily engaged in the business of providing financial services,

      • (iv) any permitted entity in which an entity referred to in subparagraph (iii) has a substantial investment, or

      • (v) any prescribed person, if it is doing so under prescribed terms and conditions, if any are prescribed;

    • (d) engaging in any activity that a company is permitted to engage in, other than an activity referred to in paragraph (a) or (e), that relates to

      • (i) the promotion, sale, delivery or distribution of a financial product or financial service that is provided by the company or any member of the company’s group, or

      • (ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;

    • (e) engaging in the activities referred to in the definition closed-end fund, mutual fund distribution entity or mutual fund entity in subsection 449(1); and

    • (f) engaging in prescribed activities, under prescribed terms and conditions, if any are prescribed.

  • Marginal note:Restriction

    (3) A company may not acquire control of, or acquire or increase a substantial investment in, an entity whose business includes any activity referred to in any of paragraphs (2)(a) to (e) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include

    • (a) activities that a company is not permitted to engage in under any of sections 417 and 418;

    • (b) dealing in securities, except as may be permitted under paragraph (2)(e) or as may be permitted to a company under paragraph 409(2)(c);

    • (c) acting as an executor, administrator or official guardian or as a guardian, tutor, curator, judicial adviser or committee of a mentally incompetent person;

    • (d) being a trustee for a trust;

    • (e) activities that a company is not permitted to engage in under any regulation made under section 416 if the entity engages in the activities of a finance entity or of any other entity as may be prescribed;

    • (f) acquiring control of or acquiring or holding a substantial investment in another entity unless

      • (i) in the case of an entity that is controlled by the company, the company itself would be permitted under this Part to acquire a substantial investment in the other entity, or

      • (ii) in the case of an entity that is not controlled by the company, the company itself would be permitted to acquire a substantial investment in the other entity under subsection (1) or (2) or 451(2), paragraph 451(3)(b) or (c) or subsection 451(4); or

    • (g) any prescribed activity.

  • Marginal note:Exception

    (3.1) Despite paragraph (3)(d), a company may acquire control of, or acquire or increase a substantial investment in, any entity that acts as a trustee for a trust if the entity has been permitted under the laws of a province to act as a trustee for a trust and the following conditions are satisfied:

    • (a) the entity acts as a trustee only with respect to a closed-end fund or mutual fund entity; and

    • (b) if the entity engages in other business, that business is limited to engaging in one or more of the following:

      • (i) the activities of a mutual fund distribution entity,

      • (ii) any activity that a company is permitted to engage in under paragraph 410(1)(d.1), and

      • (iii) the provision of investment counselling services and portfolio management services.

  • Marginal note:Control

    (4) Subject to subsection (8) and the regulations, a company may not acquire control of, or acquire or increase a substantial investment in,

    • (a) an entity referred to in any of paragraphs (1)(a) to (j), unless

      • (i) the company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or

      • (ii) the company is permitted by regulations made under paragraph 459(a) to acquire or increase the substantial investment;

    • (b) an entity whose business includes one or more of the activities referred to in paragraph (2)(a) and that engages, as part of its business, in any financial intermediary activity that exposes the entity to material market or credit risk, including a finance entity, a factoring entity and a financial leasing entity, unless

      • (i) the company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or

      • (ii) the company is permitted by regulations made under paragraph 459(a) to acquire or increase the substantial investment; or

    • (c) an entity whose business includes an activity referred to in paragraph (2)(b), including a specialized financing entity, unless

      • (i) the company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity,

      • (ii) the company is permitted by regulations made under paragraph 459(a) to acquire or increase the substantial investment, or

      • (iii) subject to prescribed terms and conditions, if any are prescribed, the activities of the entity do not include the acquisition or holding of control of, or the acquisition or holding of shares or other ownership interests in, an entity referred to in paragraph (a) or (b) or an entity that is not a permitted entity.

  • Marginal note:Minister’s approval

    (5) Subject to the regulations, a company may not, without the prior written approval of the Minister,

    • (a) acquire control of an entity referred to in paragraphs (1)(g) to (i) from a person who is not a member of the company’s group;

    • (b) acquire control of an entity referred to in paragraph (1)(j) or (4)(b), other than an entity whose activities are limited to the activities of one or more of the following entities, if the control is acquired from an entity referred to in any of paragraphs (1)(a) to (f) that is not a member of the company’s group:

      • (i) a factoring entity, or

      • (ii) a financial leasing entity;

    • (b.1) acquire control of an entity referred to in paragraph (1)(j) if the company is a company with equity of two billion dollars or more and

      A + B > C

      where

      A
      is the value of the entity’s consolidated assets, as it would have been reported in the entity’s annual financial statements if those statements had been prepared immediately before the acquisition,
      B
      is the aggregate of the values of the consolidated assets of all other entities referred to in paragraph (1)(j) that the company has acquired control of within the preceding 12 months, as the value for each entity would have been reported in its annual financial statements if those statements had been prepared immediately before the acquisition of control of that entity, and
      C
      is 10% of the value of the company’s consolidated assets, as shown in the company’s last annual statement that was prepared before its first acquisition of control of an entity referred to in paragraph (1)(j) within the preceding 12 months;
    • (c) acquire control of, or acquire or increase a substantial investment in, an entity whose business includes one or more of the activities referred to in paragraph (2)(d);

    • (d) acquire control of, or acquire or increase a substantial investment in, an entity that engages in Canada in an activity described in paragraph 410(1)(c);

    • (d.1) acquire control of, or acquire or increase a substantial investment in, an entity that engages in an activity described in paragraph 410(1)(c.1); or

    • (e) acquire control of, or acquire or increase a substantial investment in, an entity engaging in an activity prescribed for the purposes of paragraph (2)(f).

  • Marginal note:Matters for consideration

    (5.1) In addition to any matters or conditions provided for in this Act that are relevant to the granting of an approval, the Minister may, in considering whether to grant the approval under paragraph (5)(b.1), take into account all matters that he or she considers relevant in the circumstances, including

    • (a) the stability of the financial system in Canada; and

    • (b) the best interests of the financial system in Canada.

  • Marginal note:Superintendent’s approval

    (6) Subject to subsection (7) and the regulations, a company may not acquire control of, or acquire or increase a substantial investment in, an entity referred to in any of paragraphs (1)(g) to (j) and (4)(b) and (c) unless the company obtains the approval of the Superintendent.

  • Marginal note:Exception

    (7) Subsection (6) does not apply in respect of a particular transaction if

    • (a) the company is acquiring control of an entity, other than a specialized financing entity, and the only reason for which the company would, but for this subsection, require approval for the acquisition is that the entity carries on activities referred to in paragraph (2)(b);

    • (b) the company is acquiring control of an entity whose activities are limited to the activities of a factoring entity or a financial leasing entity;

    • (c) the Minister has approved the transaction under subsection (5) or is deemed to have approved it under subsection 454(1);

    • (d) subject to subsection (7.1), the company is acquiring control of an entity (referred to in this paragraph as the “target entity”) referred to in paragraph (4)(b) or (c) and

      A/B < C

      where

      A
      is the aggregate of the values, as they would have been reported in the company’s annual financial statements if those statements were prepared on the day of the acquisition of control of the target entity, of
      • (i) the target entity’s consolidated assets,

      • (ii) the assets of the company and of any subsidiary of the company that were acquired, at any time within the 12 months preceding the acquisition of control of the target entity, from any entity that, at that time, held any of the assets referred to in subparagraph (i), and

      • (iii) the consolidated assets of any entity referred to in paragraph (4)(b) or (c) the control of which is acquired by the company at the same time as the acquisition of control of the target entity — or within the 12 months preceding the acquisition of control of the target entity if, at any time within those 12 months, that entity and the target entity were affiliates — excluding any assets referred to in subparagraph (i) or (ii) and the consolidated assets of an entity in respect of which no approval of the Superintendent is required under any of paragraphs (a) to (c),

      B
      is the value of the company’s consolidated assets, as shown in its last annual statement prepared before the acquisition of control of the target entity, and
      C
      is
      • (i) 0.01, in the case of a company with equity of 12 billion dollars or more, or

      • (ii) 0.02, in the case of any other company; or

    • (e) the company is acquiring or increasing a substantial investment in an entity (referred to in this paragraph as the “target entity”) without acquiring control of it, and

      A/B < C

      where

      A
      is the aggregate of the values, as they would have been reported in the company’s annual financial statements if those statements were prepared on the day of the acquisition or increase of the substantial investment in the target entity, of
      • (i) the shares of, or other ownership interests in, the target entity that the company or a subsidiary of the company is acquiring in the transaction that results in the acquisition or increase of a substantial investment in the target entity, and the shares of, or other ownership interests in, the target entity that are held by an entity the control of which the company is acquiring in the transaction that results in the acquisition or increase of a substantial investment in the target entity,

      • (ii) the shares of, or other ownership interests in, the target entity that are held by the company or a subsidiary of the company and that were acquired by the company or the subsidiary within the 12 months preceding the transaction referred to in subparagraph (i), and

      • (iii) the shares of, or other ownership interests in, the target entity that are held by a subsidiary of the company the control of which was acquired by the company within the 12 months preceding the transaction referred to in subparagraph (i), excluding any shares or other ownership interests referred to in subparagraph (ii),

      B
      is the value of the company’s consolidated assets, as shown in its last annual statement prepared before the transaction that results in the acquisition or increase of the substantial investment in the target entity, and
      C
      is
      • (i) 0.005, in the case of a company with equity of 12 billion dollars or more, or

      • (ii) 0.01, in the case of any other company.

  • Marginal note:No exception for deemed acquisition

    (7.1) The exception in paragraph (7)(d) does not apply with respect to a deemed acquisition of control under subsection 451(7).

  • Marginal note:Control not required

    (8) A company need not control an entity referred to in paragraph (1)(j), or an entity that is incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province, if the laws or customary business practices of the country under the laws of which the entity was incorporated or formed do not permit the company to control the entity.

  • Marginal note:Prohibition on giving up control in fact

    (9) A company that, under subsection (4), controls an entity may not, without the prior written approval of the Minister, give up control, within the meaning of paragraph 3(1)(d), of the entity while it continues to control the entity.

  • Marginal note:Giving up control

    (10) A company that, under subsection (4), controls an entity may, with the prior written approval of the Superintendent, give up control of the entity while keeping a substantial investment in the entity if

    • (a) the company is permitted to do so by regulations made under paragraph 459(c); or

    • (b) the entity meets the conditions referred to in subparagraph (4)(c)(iii).

  • Marginal note:Subsections do not apply

    (11) If a company controls, within the meaning of paragraph 3(1)(a), (b) or (c), an entity, subsections (5) and (6) do not apply in respect of any subsequent increases by the company of its substantial investment in the entity so long as the company continues to control the entity.

  • 1991, c. 45, s. 453
  • 1997, c. 15, s. 388
  • 1999, c. 28, s. 141
  • 2001, c. 9, s. 550
  • 2007, c. 6, s. 371
  • 2012, c. 5, s. 179
  • 2018, c. 27, s. 130
 
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